Posts Tagged ‘ Progressive ’
I see tucked away in Thursday’s Herald the rumour that our new Commerce Minister Simon Power is thinking about having a look at the Commerce Commission.
He’s naturally being egged on by the likes of Telecom who would like nothing better than to behave in a shoddy way towards consumers without having a publicly funded body watching their every move.
I’d suggest that Simon had some more pressing issues at hand, and maybe he should be concentrating a bit more on protecting consumers rather than big business.
Being Commerce Minister doesn’t mean ignoring the people who buy the products that allow commerce to take place, in fact, in the current environment you’d think he’d be doing everything he could to encourage consumers.
It would be nice to think that big companies like Telecom, Progressive, Air NZ etc would treat consumers as a precious commodity instead of a bunch of silly tits who need to be relieved of their cash by any means possible. Obviously the longer they treat people with little respect, the more likely their are to disappear, so they do ultimately pay the price for their arrogance.
The problem is that in a very small country like NZ consumers often end up with little choice and competition so often ends up being a duopoly, where the two incumbents have a kind of gentleman’s agreement to jointly screw the consumers for every penny – Vodafone and Telecom jump to mind.
The problem usually occurs because politicians can’t help stuffing around with business and giving their favorites a helping hand every now and again, which creates the requirement for the Commerce Commission.
Naturally if Mr Powers was going to lift any regulation and barrier on business. If Mr Powers and his predecessors weren’t always throwing money at business whether it be through broad band subsidies, buying most of Air NZ, or suggesting they might bail out F&P, then I could understand him also planning to look at the Commerce Commission.
The playing field is skewed because politicians made it that way, therefore we need somebody aggressively enforcing consumers rights, and the Commerce Commission has been doing just that – hence the whining from business to have it and Paula Rebstock (who I think has been a successful crusader for consumer rights) axed.
I’m not personally convinced the grocery section of The Warehouse wasn’t making any money, and there’s no way we will ever know whether they have or not. It was always going to take a while and it simply hasn’t been there long enough to have had any chance to succeed.
There is no doubt that Progressive wanted The Warehouse to ensure a possible competitor didn’t appear because as they are struggling against Foodstuffs a third player was more likely to damage Progressives sales that Foodstuffs.
The whole thing looks like a huge setup and of course there is nothing the Commerce Commission can, or will be able to do about it.
This is a bad day for consumers and we can only home that a third player will eventually appear in the market. The Warehouse presented the best hope and that is not going to happen now.
I’m guessing the mishmash of brands is due to the three chains being picked up at different times, and I think Woolworths NZ is distantly related to Woolworths UK as is the Aussie version.
It now looks like Progressive is cleaning up these brands.
Woolworths and Foodtown have traditionally been their upmarket brands (i.e. charge more) and Countdown the cheap and cheerful brand, competing directly with Pak’n’Save part of the locally owned co-op Foodstuffs. I’m a bit hazy about this, so I might be corrected but I think Progressive kept the brands separate because of Commerce Commission concerns about the lack of competition when they picked up Foodtown. How keeping the brands separate was going to achieve competition I can’t work out, it may have been more of a cosmetic difference, but it looks like Progessive now think the time is right for a clean up, possibly because they are lining themselves up to buy The Warehouse.
The first step has been the gradual disappearance over the last month of some Foodtowns, which are being replaced with Countdowns. This may seem a bit odd because, for example, the Greenlane Foodtown which serviced a relatively upmarket area, made sense and replacing it with a budget brand doesn’t. That’s until you go inside. The new fit-outs that accompany the rebranding are a carbon copy of the Aussie Woolworths stores – wider aisles, new deli sections etc – quite unlike the Countdowns, or the Foodtowns.
The produce sections have introduced the same layout and Aussie style black crate system unique to Woolworths Australia, which may seem unremarkable to the consumer, but is a major shift for the NZ market which already has a ‘universal’ returnable crate system.
The most interesting thing about the changes (if indeed this is interesting, because I’m sure some of you have already slipped into a coma) is the actual logo changes. I can’t find any examples of the new logo for Countdown online, but it is striking in that it looks like the same colour scheme as Woolworth Australia.
There’s also been an increase in Australian Woolworths goods instore with their branding – a pleasant step up from the rubbish looking house brands they use in NZ which shouts ‘CHEAP & NASTY’ at you from the shelves. I suspect that in NZ the supermarkets have a team of five-year-old’s with crayons doing the house branding because almost without exception they seemed to have entirely missed the point of branding. People might like to buy cheap goods, but it doesn’t mean they have to look cheap!
I’m wondering if this is part of a stealth campaign to eventually rebrand all Progressives NZ stores as Woolworths (Australian) stores. You might ask why they would not just do it, or why they haven’t done it already? after-all there would be some very sensible synergies and cost savings long term from doing this. I suspect the (possible) stealth comes from the sensitivity around the lack of competition in the supermarket business in NZ, it’s an effective duopoly, and all the cute legal arguments in the world about different supermarket brands don’t change that. For any supermarket to stick their heads up is going to draw fire from the Commerce Commission, Consumers Institute etc and lead to a whole lot of publicity they don’t want as anything that reminds people about the limited competition is not good.
I might be entirely wrong, but the similarities are striking, and it will be interesting to see how it shapes up over the next twelve to eighteen months.
The original decision was largely based on the evidence of the three main parties, The Warehouse who wanted to cash up their shares and didn’t give a stuff who bought them as long as they got top dollar (no problem with that), Foodstuff and Progressive who both wanted to ensure that the potential competitor was shut down as soon as possible.
The grocery side of The Warehouse has not done all that badly and it was odd to see the company claim it wasn’t doing well, when the evidence was that in fact although it had got off to a slow start it was starting to show some success, and this is precisely why Foodstuffs and Progressive were desperate to shut it down.
There is no doubt that if it is successful this new grocery entrant will provide some welcome competition to the duopoly that operates between the two supermarket chains. We need to have some competition because while there is no evidence of any collusion between the two main players, evidence overseas shows that it is difficult for big players to resist the urge to have the odd off the record meeting on key ‘commdity’ pricing to their mutual advantage.
I’m not suggesting that this will see prices drop across the board, but it will see the possibility of a genuine third party enter the supermarket business (assuming The Warehouse now sell to someone else) and this can only be good for both consumers and suppliers long term.
It will be interesting to see whether this is appealed, Foodstuffs and Progressive are deadly serious about ensuring their market position remains unchallenged so if there is a slightest chance it is likely they will take it.
The Commerce Commission says a decision by the Court of Appeal overturning the High Court decision on ownership of The Warehouse Group Ltd is a victory for supermarket consumers and competition in markets.
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